Partners not liable over Ponzi scheme

The former partners of Mahoney, Hawkes & Goldings cannot be held liable to an investor who lost millions in a Ponzi scheme allegedly perpetrated by attorney Morris M. Goldings, who has since been disbarred, the Appeals Court has ruled.

The court found that the evidence against the partners did not support an inference of knowledge of an ongoing unlawful scheme.

“To be sure, in some jurisdictions deliberately taking steps to avoid knowledge of wrongdoing has been held to satisfy the knowledge requirement,” Judge Peter J. Rubin noted for the majority in a 2-1 decision.

“But the requirement set out by the Supreme Judicial Court of knowledge of wrongdoing in the context of aiding and abetting liability … does not by its terms extend to such conscious avoidance, sometimes also called ‘wilful blindness’ or a ‘conscious course of deliberate ignorance.’”